Navigating Cross-Border B2B Taxes in the EU
When you provide services to a business in another EU country, the VAT Reverse Charge mechanism usually applies. This means you don't charge VAT to your client; instead, they are responsible for reporting it in their own country.
How the Reverse Charge Mechanism Works
Under EU B2B rules, the "place of supply" is where the customer is established. Since you aren't charging local VAT, your Taxable Revenue equals your Gross Invoice Amount. This is a crucial distinction for freelancers: while you don't collect VAT for the government, you are responsible for the full amount as business income.
To remain compliant, you must verify your client's VAT number via the VIES system and include their VAT ID and the phrase "Reverse Charge" (or your local equivalent, such as "Steuerschuldnerschaft des Leistungsempfängers", "Autoliquidation (or TVA due par le preneur)", "Inversione contabile", "Inversión del sujeto pasivo", or "Btw verlegd") on your invoice.
Pro-Accounting Tip: If you want a "catch-all" for any EU country, you can also cite the EU Directive directly: "Reverse Charge - Article 196 of VAT Directive 2006/112/EC."
B2B EU Invoice Tax & Income Tax Reserve
"No VAT" does not mean "No Tax." While you don't need to set aside a VAT reserve for the tax authorities, your Income Tax Reserve still applies to 100% of the invoice total.
This tool helps you calculate that reserve, ensuring you don't accidentally spend the portion of your international project that actually belongs to your year-end income tax filing.
Ready to bill your EU client? Use our Invoice Generator and ensure your Reverse Charge notes are correctly placed.